Investors have been pulling out of stocks in recent days over fears the U.S. would not properly handle the Fiscal Cliff crisis which has been plaguing headlines since the summer of 2011. However, this is not a logical decision to make, as the cliff has been expected for a long time now. Many companies have already made contingency plans for a fiscal cliff in full expectation for the cliff to be reached, and for most companies, the cliff is already priced in.
It is for this reason that now is actually the best time to invest, especially in strong, well known companies whose prices generally remain high. Due to the fact that most of these companies already have contingency plans and are well prepared for a fiscal cliff, but are also extremely improbable to fail due to a budget failure, these well known companies make for extremely good picks. Stocks I would recommend investing in are classics such as F, AAPL, and WMT.
The Fiscal Cliff has recently been making headlines in such ridiculous ways that the market is being adversely influenced, especially with such titles as "Consumers Holding Back on Spending Due to Fiscal Cliff", or "Fiscal Cliff Worrying Consumers". Fortunately, these are baseless rumors designed to influence the market and bring company prices down to profitable levels before they surge back to normal after 4th quarter reports are released. U.S. consumers are very unlikely to consider the fiscal cliff while making their purchases, especially not while they have the money and are purchasing gifts for their loved ones. They are the last to consider the taxes for next year, and leaves much to be admired for news companies that release such baseless rumors.
Another factor to consider is that taxes for the middle class at the federal level are expected to increase by 5% if the U.S. fails to come up with a budget. However, most Americans already pay 5% or more at the state level, meaning people may call on their states to lower taxes to equalize their citizens budgets. Some states like New Hampshire have no income or sales tax however, so a Fiscal Cliff would simply bring these states without these taxes to the same tax levels as the rest of the country, proving these tax rates are very survivable.
